Canadian oil prices primed to see 'further improvement'

Kruger said his company "respectfully disagrees" with Notley's decision late Sunday to mandate production cuts that will curb provincial oil output by 8.7 per cent in a bid to narrow the discount on Canadian oil prices, and will comply with the decision after reviewing the details.

The steep discount has stripped billions of dollars from the Canadian economy by some estimates, and at one point Canadian oil was selling for more than $50 less than USA oil traded on futures markets.

The Alberta government hopes to roughly cut in half the 35 million barrels of oil now sitting in storage across the province - a reduction that analysts said could be achieved in a matter of months.

"While Saskatchewan understands the action taken by our neighbours in Alberta to reduce the oil glut that is depressing the Western Canada Select oil price, the impact of the differential and how it is spread across our energy sector represents a different challenge to our province", Moe said in a Monday statement.

Alberta needs new pipelines to expand its export options for its growing oil sands production. "Ottawa's failure in this area has left Alberta's energy producers with few options to move their products, resulting in serious risks for the energy industry and Alberta jobs", the Alberta Premier's office said.

Heavy oil prices sank to less than $15/bbl last month, as rising production swamped existing pipelines and rail routes, forcing some producers to shut in output.

Notley expects the production cuts to boost prices for WCS by roughly $4 per barrel, adding $1.1 billion to government revenue between 2019 and 2020.

Alberta to reduce oil production in 2019 to increase prices

Alberta Premier Rachel Notley and her cabinet have put the legal wheels in motion to begin cutting oil production. "Saskatchewan will continue to work with our provincial counterparts and advocate for the federal government to create a long-term solution to this crisis by getting pipelines built so we can sell our oil for what it is worth", Moe said. They're seeing the differential hurting their prices.

MacNaughton says he also noted for Craft that getting the Keystone XL pipeline finally approved through the USA would also help with Alberta's problems.

Above: Price of Central Alberta blend of oil. "The good news is there is light at the end of the proverbial pipeline", analysts at Scotiabank wrote in a note on November 21, referring to Enbridge's Line 3 replacement, which would provide an outlet for 370,000 bpd.

While producers said they would comply with the mandatory cuts, executives from Canada's Suncor Energy Inc., Husky Energy Inc. and Imperial Oil, integrated producers with domestic refinery and upgrading capacity, expressed disappointment.

"We trust that the agenda for our upcoming First Ministers' Meeting can be revised to better reflect the need for a substantive discussion on issues of critical importance to the Canadian economy", it says.

Canada's announcement to enforce mandatory production cuts starting next month will make moving crude on trains less attractive just as the government buys railcars.